1. Field of The Invention
This invention relates to a method and apparatus for automatically tracking, calculating and electronically paying taxes, royalties and other fees associated with transactions in electronic commerce systems. More particularly, the invention relates to tracking electronic transactions through multiple phases of the transaction occurring in multiple transaction locations, computing the correct taxes and fees and paying those taxes and fees to the appropriate recipient.
2. Description of the Problem
The Internet, particularly the World Wide Web, has provide an opportunity for a dramatic expansion of electronic commerce. Goods are shopped for, purchased, paid for and in some cases delivered over the Web. Such transactions usually have multiple phases such as shopping, purchase, warehousing, shipping and delivery. Further, each of these phases from shopping to delivery of the goods typically occurs in different contractual fee or tax fee jurisdictions.
Thus, one problem in electronic commerce is tracking the phases or events of the transaction occurring in each location or jurisdiction where that event carries tax or a contractual fee. For example, a customer participating in a given electronic transaction is in Portland, Oreg. The customer uses an Internet Service Provider (ISP) in San Jose, Calif., to dial into a seller's web site located in Boston, Mass. The customer purchases a product from a seller whose actual location is in New York City. The product is shipped from the seller's warehouse in New Jersey to the customer in Portland, Oreg. The seller must now track all events in this transaction carrying a tax fee or a contractual fee, compute the tax or other fee for the transaction, collect from the customer and pay the tax or other fee to the correct recipient.
Another problem in electronic commerce illustrated in the above example is that the transaction event in a given jurisdiction may or may not be taxable. The tax laws in many jurisdictions relating to electronic commerce are changing rapidly. In some jurisdictions, the laws have been updated and are clearly specified as to their impact on electronic commerce. In other jurisdictions, the laws are often unclear or untested as to their relevance to electronic commerce. Further, the tax laws in a given jurisdiction sometimes have specific provisions related to specific types of goods. Accordingly, a business wishing to market goods on the web has a labyrinth of laws to analyze when update its processes for paying taxes. Further, multiple events in the transaction must be tracked, and evaluated for tax if any in multiple jurisdictions. Tax records must be kept and taxes must be paid for the correct event in the appropriated jurisdiction.